Last week’s scheduled economic news included releases from the National Association of Home Builders, Housing Starts, and Existing Home Sales.
Weekly reports on new jobless claims and mortgage rates were also released.
The National Association of Realtors® reported that sales of previously owned homes rose to 5.46 million sales on an annual seasonally adjusted basis in December. This reading surpassed expectations of 5.21 million sales and November’s reading of 4.76 million sales. November’s low reading was in part affected by new mortgage rules, which delayed some closings into December. Economic factors pushing housing markets include low driven by falling fuel costs easing consumers’ budgets could provide confidence to move up to a larger home and for first time buyers to enter the market.
Existing Home Sales Up 7.6 Percent in December
There was a 3.9 month supply of pre-owned homes on the market in December; this was the lowest inventory since January 2005. High demand for homes and a slim supply of available homes continued to tighten housing markets. Growing demand for homes coupled with a shortage of homes for sale are driving up prices; the national average price of a pre-owned home rose 7.60 percent in December to $224,100. Rapidly rising home prices present an obstacle to first time buyers and as home prices rise, more buyers will face affordability concerns.
Housing Starts dipped in December to 1.15 million as compared to expectations of 1.23 million and November’s reading of 1.18 million housing starts annually. Builders constructed homes in 2015 at the highest rate since the recession. While December’s reading fell short of expectations, housing starts increased nearly 11 percent year-over-year. While builders cite obstacles such as shortages of land and labor, a growing pace of housing starts is seen as a partial solution to the shortage of available homes.
Building permits issued increased 12 percent in 2015; permits issued gauge future building activity and supply of available homes.
Mortgage Rates Fall for Third Consecutive Week
Average mortgage rates fell last week according to Freddie Mac. The average rate for a 30-year fixed rate mortgage dropped 11 basis points to 3.81 percent; the rate for a 15-year fixed rate mortgage fell by nine basis points to an average of 3.10 percent. The average rate for a 5/1 adjustable rate mortgage dropped 10 basis points to 2.91 percent. Discount points averaged 0.60, 0.50 and 0.40 percent respectively. Sean Becketti, chief economist for Freddie Mac, cited turbulence in the financial markets as a factor contributing to lower mortgage rates.
New jobless claims rose to a seven week high of 293,000 new claims as compared to expectations of 279,000 new claims and the prior week’s reading of 283,000 new claims. The four-week rolling average of new claims jumped by 6.500 new claims to an average of 285,000 claims. Lingering layoffs of temporary holiday workers were cited as contributing to higher first-time claims.
Next week’s scheduled events include data on new and pending home sales, the Case-Shiller home price indexes. The Fed will release its latest FOMC statement. Weekly reports on mortgage rates and new jobless claims will be released as usual. Reports on consumer confidence and sentiment will also be released.
Have a great day and please call me direct with any questions, 303.668.3350.
If you are at the stage in life where home ownership is within your reach, you are probably wondering whether you should start looking for a home or whether you should keep renting. Renting is easier, people say, and it gives you more mobility however over the long term, all rent money can really add up and eventually reaches a point where buying makes more financial sense.
Renting Doesn’t Generate Equity
One of the single biggest sources of wealth in the United States is home equity. As you pay down your mortgage you invest more and more of your money into your property, and it appreciates in value. When you sell the home you make a profit.
Renting Doesn’t Give You Access To Homeowner Tax Credits And Deductions
There are several tax benefits available to homeowners that renters simply cannot access. As a homeowner you can deduct mortgage interest from your taxes thereby reducing your taxable income however there’s no such deduction for renters. You can also deduct property taxes and some closing costs when you purchase a home – there are no corresponding tax benefits for renters.
One of the biggest hurdles keeping people out of the real estate market is the down payment.
Visit my National Homebuyers Fund page and gain access of up to 5% of the purchase price and provided you qualify, this is money that does not have to be paid back!
Renting may be a good short-term solution, but over the long haul, owning is almost always better. Call a local mortgage professional to learn more.
Click here for a link to my secure loan application or contact me direct at 303.668.3350!
Who is NOT required to pay the VA funding fee?
VA loan applicants pay a funding fee – as of 2014, 2.15% of the total loan amount. Some veterans and spouses are eligible for exemption.
Broadly speaking, veterans who received disability benefits – current or former and who are NOT currently in debt to the government may be exempt from the funding fee. Some spouses may qualify as well.
The key thing to understand is, exemption from the funding fee is NOT automatic! Borrowers must certify their veteran status, government debt, benefits and active service state on VA Form 26-8937. My team will help you the entire way!
Contact me direct at 303.668.3350 for any questions regarding your VA home loan or eligibility.
The real estate market is full of terminology that can make a home purchase or refinance seem more than a little complicated. If you are currently looking for a home and are considering your loan options you may have heard the term debt to Income ratio. In the interest of simplification, here are a few insights on this term and how it can impact your investment.
Determining Your ‘Debt to Income (DTI)’ Ratio
It is important to consider what exactly your debt to income ratio is before your home purchase as this will determine how much you can afford. Calculating your debt to income is fairly simple. Begin with your monthly debt payments, including any credit dcard, loan and mortgage payments. Divide by your monthly gross income to get a percentage. In the event that your monthly debt is $700 and you make $2800 in income, your debt to income ratio is 25%.
What Your Debt to Income Ratio Means To The Bank
The DTI is a very important number when it comes to a home loan because it enables the bank to determine your financial situation. A DTI of 25% leaves some room as most banks will allow for a DTI percentage that runs between 36-43%. In the case of the above example, this means that the most debt this person could take on per month is about $1200. While banks vary on this percentage, credit history also plays an important part in the DTI that will be allowed.
Paying Down Your Debt Or Purchasing A Home
In the event that you have a DTI ratio that exceeds what your bank will allow, you will need to consider your debts before moving on to investing in a home. If you’re planning on purchasing a home in the next year, it’s a good idea to tackle high-interest debt first. However if you happen to have money saved up that you’re planning using for a down payment, it’s worth considering that putting more than 20% down may slightly increase the DTI percentage your bank will accept.
Contact me direct today at 303.668.3350 and I would be happy to assist you with your home loan prequalification at which time we will calculate your debt to income ratio.